New bill would close lawyer loophole that makes Florida home insurance more expensive
A new bill could mean lower bills for Florida homeowners by closing a loophole that has increased home insurance costs statewide.
Florida homeowners could see relief in their insurance costs if a new bill succeeds in cutting down on what consumer protection watchdogs call rampant litigation abuse.
As Florida businesses and homeowners brace for insurance cost increases into the double digits, a loophole that allows attorneys to cash in through their fees on common property claim cases has helped push up the price of home insurance for residents of the Sunshine State.
Senate Bill 76, sponsored by Sen. Jim Boyd, R-Bradenton, would curb attorney fees related to property insurance claims – especially fees known as “contingency risk multipliers.”
SB 76 also would limit the costs of claims for roof damage. The bill was advanced by the Senate Banking and Insurance Committee Feb. 2 on a 9-3 vote.
One reason Floridians have seen increasing home insurance premiums is the exploitation of these “multiplier” fees, an outdated and unnecessary legal incentive originally intended for use in cases where legal counsel might be hard to find. While Florida allows plaintiffs’ attorneys to collect fees when they prevail in a case against insurance companies, courts can also approve an additional “multiplier” fee meant to incentivize attorneys to represent clients.
More recently, these fees have been abused by attorneys in litigation-for-profit schemes to enrich themselves through routine property insurance claims – at the expense of home insurance policyholders statewide.
The egregious example of Florida trial lawyer Scot Strems – who was suspended by the Florida Supreme Court in June 2020 – shines a light into the schemes that have driven up home insurance premiums for Floridians. Strems’s law firm regularly handled 10,000 lawsuits at any given time, although it only had 20 lawyers on hand.
The firm would often file four separate lawsuits per claim and engage in other fraudulent behaviors – tactics incentivized by multiplier fees, allowing the firm to cash in while contributing to driving up insurance costs. By clogging up the courts with redundant lawsuits and pursuing claims to profit on fees, the consequences fell to the “homeowners, whose premiums ultimately fund both sides” in the form of rising insurance costs.
SB 76 looks to put a damper on runaway attorney fees by limiting them to “rare and exceptional circumstance with evidence that competent counsel could not be retained in a reasonable manner.” It would also reduce the deadline for filing claims to two years and require policyholders provide notice 60 days before filing lawsuits – provisions that lawmakers hope will prevent frivolous litigation-for-profit.
“The fee multiplier is already severely limited at the Federal level,” said Michael Carlson, President and CEO of the Personal Insurance Federation of Florida. “Yet today in Florida, attorneys taking on routine residential property claims are asking to be paid twice their hourly rate, not because they deserve it but because they can. And those costs are passed on to insurance consumers.”
SB 76 would also crack down on roof damage claims, which insurers contend are host to questionable and fraudulent claims, with homeowners often solicited to file for repairs – in turn driving up insurance costs across the board.
By closing the loophole, lawmakers hope the measures will give homeowners some respite after a surge in insurance costs following regulators last year approving dozens double-digit insurance rate increases. Following 2017’s Hurricane Irma and 2018’s Hurricane Michael’s combined damage of nearly $30 billion, insurers requested rate increases.
Since December 2019, 55 insurers have raised rates by more than 10% and dozens by more than 15%, with some climbing by 30-40%.
“It’s time to curb use of the contingency fee multiplier allowing some greedy attorneys to essentially double dip on fees,” Carlson added.